Wednesday, November 18, 2009

The Nordstrom Way: The K-Selected Model of Doing Business


“I come from the land of Nordstrom customer service,” blogger and author Kimmelin Hull tells us. “There were stories about people bringing in pairs of shoes that were years old, in poor shape, and definitely not from Nordstrom. They approached the sales desk and demanded a refund for the shoes they no longer cared for. They got what they asked for.” Nordstrom refunds items at any time purchased from any Nordstrom store. And sometimes even from another store!

Everyone has his or her own story to share, but I like this one: it took place at the Anchorage store soon after Nordstrom’s 1975 purchase from the Northern Commercial Company. A customer, unaware that the store had changed hands, returned a set of tires. Nordstrom accepted the tires. Nordstrom doesn’t sell tires.

John Nordstrom emigrated to the United States in 1887, hoping to found a department store. He co-founded the shoe store Wallin & Nordstrom in 1901 in Seattle. Over the years, Nordstrom swelled from one downtown Seattle shoe store into a nationwide fashion department store renowned for its customer service, generous size ranges and wide selection of fine apparel and accessories—oh, and shoes. “Known for its wide aisles…tasteful fixturing, seating for shoppers and live piano players, Nordstrom epitomizes specialty retail department store shopping,” says Wikipedia.

The Nordstrom model of customer service is based on building a long-term relationship with returning customers; rather than the one-shot sale. It is very similar to the reciprocal altruism I talk about in a previous post that explores "the Prisoner's Dilemma". An incredible example of this practice is the story Spector tells of a customer who loved a certain model of slacks that was on sale at Nordstrom. The salesperson was unable to find her size there or at any other Nordstrom in town. Aware that the same slacks were available at a competitor, the associate secured some petty cash from her department manager, nipped over to the competing store, bought the pair (at full price) then sold it to the customer at the Nordstrom sale price. Obviously, Nordstrom didn’t make money on that particular sale, but this was considered an investment in promoting the loyalty of the customer. No doubt, she would think of Nordstrom for her next purchase.


Nordstrom’s 75-word Employee Handbook was contained on a small gray card, that read: “…Our number one goal is to provide outstanding customer service. Set both your personal and professional goals high. We have great confidence in your ability to achieve them.” Their only rule was Rule #1: Use good judgment in all situations. There will be no additional rules.

Nordstrom developed 8 management principles to achieving its #1 status for customer service in America, which are discussed in Robert Spector’s book, The Nordstrom Way (2005) :

  • Provide your customer with choices
  • Create an inviting place for your customers
  • Hire nice, motivated people
  • Sell the relationship
  • Empower employees to take ownership
  • Dump the rules (tear down barriers to customer service)
  • Encourage internal competition
  • Commit 100% to customer service
Nordstrom’s model depends on long-term investments. These terms also exist in the science of ecology. Back in the 1970s, ecologists Robert MacArthur & E.O. Wilson coined two diametrically opposing strategies adopted by species in Nature in relation to the carrying capacity of their environment. These opposing strategies were described by Eric Pianka as either a K-selected or r-selected strategy. The r-selected (opportunist) species tend to exploit less-crowded ecological niches, and produce many offspring, each of which has a relatively low probability of surviving to adulthood. In contrast, K-selected (equilibrium) species are strong competitors in crowded niches, and invest more heavily in fewer offspring, each of which has a relatively high probability of surviving to adulthood. It goes without saying that r-selected species dominate unstable, unpredictable, changing and harsh environments, investing in the numbers game vs. the stability of the environment. Characteristic traits of r-strategists include high reproductive rate and numbers (fecundity), small size, early maturity and short-lives and can disperse offspring widely (e.g., most weeds, mice and viruses). K-strategists, on the other hand dominate in stable environments, where investment and successful competition—or creative cooperation and niche partitioning—can serve the organism because the environment won’t change and investment in it is logical. K-strategists are typically larger, have longer life expectancies and produce fewer offspring that require parental care. Examples include most mammals (like us), trees, whales and elephants. It goes without saying that K-selected organisms tend to succeed r-selected organisms, which are often the first colonizers of unstable environments that help to increase biodiversity and stabilize the environment.

Social and economic paradigm examples that follow this ecological model include the French Revolution and Schumpeter’s economic theory of “creative destruction” in corporate succession. Creative destruction was first introduced as a term in 1942 by the economist, Joseph Schumpeter. He used it to describe the process of industrial transformation that accompanies radical innovation. According to Schumpeter’s view of capitalism, innovative entry by entrepreneurs sustained long-term economic growth, even as it destroyed the value of established companies that enjoyed some degree of monopoly power. Xerox, for example, saw its profits fall and its dominance vanish as rivals launched improved designs or cut manufacturing costs, drawing customers away. This is how ecologists describe the seral stages of colonization: initial monopolization of pioneer opportunists that give way to increased diversity and niche partitioning of resources. Creative destruction is a matter of scale.

Economics and Ecology are very similar, with terms being applicable interchangeably like niche, productivity and carrying capacity, equilibrium, succession, competition, co-evolution, and so forth...even in terms of theory vs. reality. John W. Dimmick’s book, “Media Competition and Coexistence: the theory of the niche” examines these relationships.

Nordstrom’s exemplary customer relations provides a successful and inspirational example of business leadership. Spector tells the following story of a customer shopping at the Emporium, a competitor to Nordstrom, in San Francisco: “A customer has just purchased a dress shirt … and begins to walk out …the salesman calls, “Wait! Stop!” The shocked customer freezes in his tracks. The Emporium salesman…grabs the shopping bag, fishes the receipt out …scribbles the words “Thank you” on the receipt and hands all back to the customer and says with a sigh, “Ever since Nordstrom came to San Francisco, we have to do this.” What is good competition if not exemplary leadership in a culture that must successfully co-exist?

In response to the question, “are Nordstrom employees exceptional or are they simply in an atmosphere where they are expected to be exceptional so they are?” Marti Wikstrom, a Nordstrom executive responded, “At Nordstrom, they work at an exceptional level because they are supported by the culture.” Nordstrom also gives the people on the sales floor the freedom to make decisions—and management supports them in those decisions. Individual creativity, says Spector, is a by-product of freedom and sales people are judged on their performance, not their obedience to others.

2 comments:

Jean-Luc Picard said...

I hadn't hear of Nordstrom before. Thanks for the education.

SF Girl said...

I think they are only in North America, Jean-Luc... only in the States, in fact... A very popular and well-liked department chain with excellent quality merchandise and, of course, service... :)

... but no tires!